Five months after acquiring an asset management firm, a small Pennsylvania banking company is taking a hands-off approach to the new unit.

Keystone Financial Inc., a $4.7 billion-asset company based in Harrisburg, is trying to give extra leeway to Martindale, Andres & Co.

Besides allowing the West Conshohocken, Pa.-based asset management firm to retain its name and separate corporate identity, the bank transferred supervision of its trust staff to Martindale Andres.

And the bank entrusted Martindale Andres - which managed only $260 million before the merger - with $2 billion of client assets from its five community banks in Pennsylvania and eastern Maryland.

"You do have to let the investment adviser operate as it did before," said Robert E. Leech, president and chief executive of Keystone Asset Management, which oversees Martindale Andres. "What got us to the table was their talent, and we don't want to mess with it."

Investment bankers and consultants said Keystone is in the vanguard of smaller banks intent on improving their investment management.

The acquisition shows that Keystone executives realize the business is changing and are prepared to change too, said Jeb Britton 3d, a senior consultant with Spectrem Group.

He added that these arrangements could help a bank erase the stigma that is a bad asset manager.

Keystone's Mr. Leech said he is working to meet the demands of increasingly sophisticated trust and investment clients.

"Our gray-haired ladies today ask us about risk tolerance and the S&P 500," Mr. Leech said. "People don't believe trust departments can manage money. I got tired of fighting that."

Now he can tell clients a registered investment adviser is managing their money. "It's interesting to see the changed perceptions of clients who challenged us on a regular basis before," he said.

Robert P. Andres, a founder and president of Martindale Andres, said the bank's former trust officers are now Martindale investment officers. They're still in the branches, but video phones hook them up meetings and they get constant messages over the Bloomberg message system.

"I try to make them feel like they're here, not out in left field, but that they have an opportunity to advance," he said.

Mr. Andres added that advancement for everyone is tantamount to the deal's success.

"I'm a large stockholder of Keystone now. Obviously I want it to do well," he said. "You've heard a lot about multiples and what did something sell for. That is not the only issue."

Banks Keystone's size rarely buy asset management companies, said Peter L. Bain, managing director of investment bank Berkshire Capital Corp.

But the Martindale deal could be a harbinger.

"I wouldn't be surprised if you saw more community banks looking at investment management acquisitions as an opportunity," Mr. Bain said.

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